Almost all home insurance policies insure the following;
- The home and attached structures.
- The contents and personal affects of the owners.
- Outbuildings that are separate from the home. (Garage, playhouse, shed, etc)
- Additional Living Expenses
- Liability
Each one of these items will have an amount of coverage assigned to them. In this case let's assume that replacement cost of the home is $200,000. The package would look something like this.
- The Home $200,000
- Personal Belongings $160,000 80% of the house amount
- Outbuildings $ 30,000 15% of the house amount
- Additional Living Expenses $ 50,000 25% of the house amount
- Liability is not included in the single amount of protection but coverage amount can be $1, $2, 3, or $5 Million.
Insurance companies usually provide this package of coverage as it meets the needs of about 80% of homeowners. The majority of people will be well protected with this type of packaged coverage.
However, some homeowners may require more insurance in a certain area. Maybe they require $190,000 for personal belongings. They may not need any outbuilding coverage because they don't have a garage. Without the single amount of protection they may be under insured on the contents and over insured on the outbuildings.
The single amount of protection allows them to borrow coverage from the area they are over insured and apply it in the area that they are under insured.
Let's add up all of these four figures - we come up with a total of $440,000.
The total amount of insurance shown on the policy will be $440,000 rather than there being an amount shown for each item.
Simple isn't it?
Here is a typical insurance policy on a Home. Each company may have a little different package layout but a single amount is shown on the policy which usually adds up to the four different coverage items.
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